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Govt offers to buy Dabhol stake at 20% discount

Santosh Tiwary

The government has asked Enron Corp to sell the foreign equity in Dabhol Power Company at a 20 per cent discount to the face value. Enron, however, has rejected this offer.

When contacted, a company spokesperson said, "It is clear that Enron and its partners, GE and Bechtel, would need to recover 100 per cent of their costs incurred in developing and operating the Dabhol power project."

Earlier, Enron chairman Kenneth Lay had proposed to sell the 85 per cent foreign equity (Enron 65 per cent, Bechtel and GE 10 per cent each in the $1 billion equity) in DPC at cost with staggered payments to the government or Indian financial institutions.

The issue is likely to be discussed in Friday's crucial meeting called by finance secretary Ajit Kumar in which the domestic lenders are slated to submit the roadmap for revival of the 2,184 mega watt project.

The meeting will be attended by secretaries of the power and petroleum ministries and senior finance ministry officials besides the FI heads.

A key issue that would come up is the question of repatriating dividends of $150 million declared by DPC in favour of Enron Corp, USA during the few years. Another issue likely to be discussed is that of compensation of $ 200 million incurred by Enron on developmental expenses.

In a similar meeting convened by Ajit Kumar exactly a fortnight back, the FIs were asked to chalk out a blueprint for resolving all the vexed issues including completion of the second phase of the project and transfer of equity of existing foreign equity holders to the new promoter(s).

Sources said the report would focus on the sacrifices to be made by all the concerned parties for re-commencement of the 740 mw phase I and completion of the 1,444 mw phase II of the project.

While the FIs will be required to effect a further cut in the interest rate on their lending to DPC, Enron along with its foreign partners might have to agree to offload their stake at a discount to face value.

The FIs are likely to suggest that the Centre provide some duty relief on equipment imported which would help Dabhol bring down the tariff to a level acceptable to Maharashtra and other interested states. The Godbole committee had suggested that the tariff be brought down to Rs 2.40 per unit.

Taking a cue from the Godbole committee report, the FIs are also likely to suggest a restructuring of the $3 billion project which would include separation of the LNG terminal and conversion of the project exposure from dollars to Indian rupee.

Sources said that the Indian lenders are also likely to ask Enron to complete the phase II of the project before exiting the country.

They added that once the roadmap prepared by the FIs is approved by the government, the institutions would initiate negotiations with private players.

Already, AES, Tata Power and Hindujas had evinced interest in taking over the company.

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